A notable corporate fete of the new year 2020 was thrown recently to celebrate a major milestone in Rwanda’s telecoms sector.
Glasses were tossed amid ululations in addition to shaking of legs. Glowing speeches flowed to hype the milestone.
It was time to celebrate what was actually a major feat in Rwanda’s merger and acquisition scene.
Airtel Rwanda, owned by Bharti Airtel, the Indian conglomerate fronted by dollar billionaire Sunil Bharti Mittal, has successfully acquired a single license combining Airtel and Tigo to deploy in Rwanda.
The buy-out of an existing operator was meant to shore up its numbers in a tough environment.
The merger signals the start of a new wave of competition within Rwanda’s telecoms sector.
Unification of Tigo and Airtel brands into one business unit is now staring at a fierce two horse race; or call it a perfect duopoly.
Airtel has a combined market share of 46% against market leader MTN with 54%, according to the sector regulator, Rwanda Utilities Regulatory Authority (RURA).
This, according to experts is a very close call.
The party held at Kigali convention Centre on January 16, 2020, signaled the onset for battle for supremacy in the sector between the two leading brands.
We should expect Airtel to start luring consumers with freebies and massive data at cheap prices in order to disrupt the market.
The market has already began experiencing an intense price war. Both networks announced price revisions lead up to end of 2019.
The beneficiary will be the client in this upcoming price war. More is yet to come.
Bharti Airtel has been on a mission in Africa trying to upstage MTN Group for the last 10 years with mixed results.
A key feature of the two horse race in Rwanda between Airtel and MTN starting the year 2020 will be fought using the business orientation of parent firms of the two brands.
While MTN will be contented with staying on top, serving mostly corporate clientele, with belief they can defend the tittle and inadvertently staying within its comfort zones, Airtel in opposition will dive downwards to reach out to the bottom of the Rwanda’s economic pyramid, at least looking at the brand’s marketing and adverting strategy out there.
“We are now one brand, Airtel,” said Airtel Rwanda MD, Amit Chawla. “This means we have to deliver beyond expectations.”
Chawla said Airtel will immediately begin launching a series of new products and services. “Our journey has just begun,” he said at the inauguration of the new 12-year license.
Airtel is sensing an immense fortune at the bottom of the economic pyramid and that is how Sunil Bharti Mittal cut out his teeth as a global telecoms guru by serving the poor, according Forbes Magazine.
The magazines’ India’s richest 2019 says that Sunil Mittal’s Airtel is among India’s largest mobile phone operators with more than 400 million subscribers, adding that, “Airtel, which has SingTel as its partner, is embroiled in a bruising price war with rival Mukesh Ambani’s Relience Jio.”
In addition, Forbes says that Mittal owns Airtel payments bank, described by Forbes Magazine as “a niche bank in a joint venture with Kotak Mahindra bank controlled by fellow billionaire, Uday Kotak.”
Mittal’s son Kavin runs SoftBank-backed messaging services, Hike, valued at US$1.5 billion.
In other words, it is very clear from the orientation by Mittal as a telecoms billionaire, that the war coming up this year within Rwanda’s telecoms sector will be fought within the mobile money frontier basing on intense price wars. Clearly, MTN must have sensed it.
The brand delivered a knee-jerk blow by snatching Airtel’s Mobile Money wizard mid this month.
Question is, what are the new services and to what extent will Airtel engage MTN in a battle for supremacy such as brutal price wars and for how long?
Airtel’s Chawla says: “Our focus will be going beyond the normal sending and receiving services. We intend to offer our customers other financial services such as more payment options, savings, loans and insurance.”
The combined business unit will serve over 4 million subscribers using high speed data.
This service, as part of the two horse race between Airtel and MTN, is very likely to provide the real convergence between banking and telecoms.
This at the backdrop of the Banking sector in Rwanda increasingly consolidating its grip towards being branch-less and cashless drive.
But here is a killer bit of the game. Airtel subscribers can now send money for free. Also, subscribers will be making transactions at a small margin and gaining free data or airtime in return.
However, while MTN commands the largest mobile money market share after many Tigo Cash subscribers migrated to MTN, sources told Taarifa that Airtel is planning a sweep to recoup those still holding Tigo lines by offering them a cash bet to trigger them back into the network.
If that happens, Airtel will have delivered a blow to MTN. Times will tell.
Truely, statistics indicate that financial inclusion will be the main key driver of Airtel-MTN battle in Rwanda.
Out of approximately 4 million adult Rwandans less, than 1.5 million use banking services. In addition, less than 100,000 Rwandans exclusively rely on commercial banks to do business.
Meaning that Airtel in a bid to out-compete MTN will most probably go for boosting of what it calls its enterprise businesses and household audience.
Chawla explained: “Access to financial inclusion is what will grow this industry going forward.”
That will be done in a number of ways. The mobile money agent will be the infantry boot soldier on the battle on the ground.
Increasing, Airtel agency footprint in the market will take the battles to those previously not reached by MTN plus those who were on Tigo network.
Chawla says: “The boosting of agency network will enable us increase our services”. Airtel went on the offensive to introduce more services focused on financial inclusion such as “Ingoboka cash” or “sugira” with expectation to soon include micro insurance and even micro soft loans.
Therefore, with the conclusion of the merger, the telecoms battle is likely to become more intense. Consumers can expect a round of parties as Airtel is expected to bring down prices of services in the market.
The price wars between MTN and Airtel is very likely to be a short-term strategy by Airtel.
Meaning that any price wars is very likely to last for at least one year, going by how Airtel has been waging its supremacy wars in other markets.
Mobile data prices are expected to be lowered in Rwanda.
Average revenue per gigabyte is expected to go down by at least 2.5 to 5% in the opening of the impending price wars with Airtel going for promotions to attract users with cut price contracts.
Experts say that Airtel strategy for going for bottom of pyramid can be aligned to situations where prices are dropping in Sub Saharan Africa, but not fast enough to support bridging of digital divide on the continent.
Some experts define internet as being truly affordable when 1GB of mobile data is priced at no more than 2% of average incomes.
In this scenario, Africa is falling far shorter as 1GB costs 8% income on average across the continent in comparison to 2.7% in USA and 1.5% in Asia. The argument ignores the volume of income, and focuses on substance of the income.
Affordable internet is still out of reach for millions of Africans due to a number of factors.
Meanwhile, Rwanda is not exclusive, despite it being among the countries with cheaper internet at less than US$1 for 1GB followed by Tanzania in the region with Egypt, leading the park in Africa.
As the new year 2020 unfolds, Airtel is showing signs of a soon being a brutal contender for top slot again after losing its position of 58% market share in 2018.
Airtel is already ahead of MTN in building a better network with 89% coverage of both 3G and 3.5 G network against MTN’s 83% range. MTN’s internet connectivity sacks, but they beat Airtel on voice and bottom line, despite having the poorest indoor connectivity in most parts of the country including Kigali.
For some reason, on subscription, Airtel lost miserably to MTN in 2019. The brand was still figuring out how to reorganize itself after eliminating Tigo from the market through a buy out, but the past three months MTN has had it rough with its its terrible network.
In the business of competition, it is usually the market leader at risk of being savaged by the second or third player.
After losing almost the lead spot on market share, Airtel’s outline of products this year is clear indication MTN is at risk of slipping down.
Next week we will assess each CEO’s strength and market tactics as both executives flex muscles to show who is tougher than the otherm
MTN’s new CEO, Mitwa Kaemba Ng’ambi, who previously CEO for Airtel Ghana, with inside knowledge against the now competitor, has come with vigor and massive energy.
But, Airtel’s boss has been in Rwanda for some years. He knows the corners on the market road. Who will beat the other? That’s analysis for next week.